What Should I Do With an Inheritance?

If you find yourself the recipient of an inheritance, we recommend that for the first few months, you do absolutely nothing with it. Take that time to start developing a plan and make sure you are focusing on using that money to better your family’s life over the long term. That plan could include building up an emergency fund, paying off debt, and if it is large enough, maybe even paying off your home.

While we recommend most of that money go towards long-term goals, we often advise people to take a small portion of the money, perhaps 5 to 10 percent, and use those funds to do something fun like taking your family on a vacation. The initial impulse for many people is to blow the money on that boat you’ve always wanted or to take a series of extravagant trips, so this is a compromise that many people find scratches that itch while being responsible. Putting that 90 to 95 percent of the inheritance towards your family’s financial goals is taking advantage of a once in a lifetime opportunity to potentially completely change your financial situation.

Another step you may want to consider is building a team around yourself to help you make the best decisions with that money. CPAs, attorneys, and financial advisors can all be valuable partners that help you fully think through your decisions as you are making them and help prevent making some of the avoidable mistakes we see people with newfound money make. While not mandatory, these partners bring valuable experience to the table that may change the way you decide to proceed.

So, if you find yourself the recipient of a large inheritance, take a step back and spend a few months thinking through your goals and developing a plan. Letting it sit in the bank for a few months doesn’t do any harm and as we've said, this is a once in a lifetime opportunity that, in the words of Dave Ramsey, has the potential to change your family tree. Handled properly, this could free you up from financial burdens you may have been carrying and completely change the trajectory of your family’s financial situation.

John Travis is a Financial Advisor at Richard Young Associates and is a Dave Ramsey SmartVestor Pro. Want to learn more about him and our other advisors? Find out more here.

Advisory services are offered through Richard Young Associates, a Registered Investment Advisor. This is not an offer of sale of securities. All investing involves risk, and particular investment outcomes are not guaranteed. This website is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation for any security, or an offer to provide advisory or other services by Richard Young Associates, in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained on this website should not be construed as financial or investment advice on any subject matter.